Friday, July 20, 2018

TRUMP FAIL: Attack on Fed is a Bust

President Trump launched a tweet attack at the Federal Reserve this morning. This is the second day in a row he has attacked the Fed (SEE:Trump Attacks Fed....). But it is not because he wants the Fed to stop manipulating monetary and interest rate policy. He wants them to be more aggressive in keeping interest rates down. These are the two tweets he sent out this morning:

China, the European Union and others have been manipulating their currencies and interest rates lower, while the U.S. is raising rates while the dollars gets stronger and stronger with each passing day - taking away our big competitive edge. As usual, not a level playing field...

....The United States should not be penalized because we are doing so well. Tightening now hurts all that we have done. The U.S. should be allowed to recapture what was lost due to illegal currency manipulation and BAD Trade Deals. Debt coming due & we are raising rates - Really?

Three days ago, before the Trump attack started. I posted in the EPJ Daily Alert the odds of a Fed rate hike in September as measured by Fed interest rate futures traders.

At the time, traders indicated an 89.2% probability of a September rate hike, with an 86.1% probability of a 25 basis point hike and a 3.1% probability of a 50 basis point hike.

After Trump's tweets, there has been barely any movement in the expectations. Traders aren't taking Trump's tweets seriously.

Traders now indicate an 89.1% probability of a September Fed rate hike just 1 basis point difference from before Trump's attack. And, indeed, the likelihood of a 25 basis point hike (which is most likely) has climbed 0.8% to 86.9%